* AFSCME has responded to Senate President John Cullerton’s new pension reform idea, which is outlined here. From Council 31…

The latest pension-cutting concept outlined by Senate President John Cullerton looks like extortion—both unconstitutional and blatantly unfair to teachers, police, nurses, caregivers and other public employees.

For years, our union and the We Are One Illinois coalition of which we are a part have stood virtually alone in urging fair and constitutional solutions to the underfunding of Illinois pensions. We demonstrated our commitment last year by working constructively with Senator Cullerton to develop a compromise pension measure.

We also strongly opposed pension-cutting schemes that are clearly unconstitutional, but politicians charged ahead, triggering costly litigation. We will continue to defend the integrity of the Illinois Constitution.

Recently, a near-unanimous bipartisan majority of the state Supreme Court sent a strong signal that the retirement benefits of public employees are inviolable. To suggest that politicians could prevent workers from bargaining for fair wages only if they surrender a protected right is the same kind of thinking that has delayed real solutions to the pension funding problem. It’s long past time for gimmicks.

Public employees earn their modest pensions by teaching kids, caring for the most vulnerable and keeping us safe. They have always paid their share. That’s why it’s so outrageous that the politicians who caused the pension debt—and their corporate allies whose tax loopholes divert billions from the public good—are still seeking ways to force public servants alone to pay the cost.

Well, I think he is on to something there. Pay raises are not guaranteed by constitution. The near retired and retired would be protected. Younger workers can make their choice. Let’s face it corporations and wealthy elite are not going to be part of the process.

AFSCME is right. And judging by recent events, this cut-the-pension initiative is so over. Our Democratic political masters (Illinois is a one-party state, remember) need to get off the pension-cutting shtick and start doing what they are supposed to do for their hefty compensation-move on, find some alternative solutions and get them done.

the sad/depressing thing is the Unions had agreed to a decent deal with cullerton. Nobody wanted to consider it or put it in play. Now the unions have no real incetive to enter into such an agreement again. The State quiet frankly made a very unwise decision to ignore the cullerton deal, and now the chickens are coming home to roost.

===Taking what would be applied as a pay increase as an increase in the contribution would be a solution in part…===

And threatening to do so in perpetuity is probably enough to bring everyone back to the table to come up with as fair a solution as possible. Employees will almost certainly need to contribute more to the pensions, but so will taxpayers. There is a constitutional way through this mess and I hope Cullerton’s proposal is enough to get the ball rolling.

Public sector or private sector really makes no difference many employees are facing pension freezes, DB pension conversions to cash balances, terminations of retiree medical, changes to high deductible/high out of pocket healthcare plans, small pay increases, and wage freezes. As ole Walter said ” and that’s the way it is”. It sucks for sure. Most private employers understand and consider the consequences of what they provide their employees. For many years now this employer, Illinois with both Dems and Repubs at the helm, has not. Now it is what it is. Looks like it will take a combination of legislative ingenuity and hard ball, concessionary bargaining to resolve the situation. IMO retired employees of the State should be left out of what it’s going take to fix this, hate to think our State is akin to corporations (I keep forgetting they are people too!) that cut off benefits to workers who had a promise; if they worked to a certain point they would get this and that, to cut it after the fact is immoral.

we should’a made the pension payments when we could’a….so we would’a not been in this mess.

As we all know when bad decisions are made with money the only way out of a financial mess is cut spending, raise revenue and commit to a payment plan. The ramp was the payment plan, but our legislators never did the first 2. Instead of Cullerton looking for gimmicks, it is time for the lot of the them to take the first 2 steps and cut spending and increase revenue.

Stop wasting time looking for the next gimmick to be taken to court and show some leadership.

I posted this in the other thread in answer to a question by - angelo mysterioso - but it is also applicable here.

To oversimplify things…

You can contract for almost any legal purpose, including giving up a lot of your contractual rights under federal and state law, if it is properly offered and accepted. Generally you do so voluntarily in exchange for something that you believe is of more value to you.

The real question is why would you voluntarily give up constitutionally protected benefits? What would be valuable enough to persuade you to do so?

Assuming the courts continue to rule as expected in favor of the retirees / Tier 1 employees, this is the problem the State and General Assembly has. Health insurance is off the table. 3% AAI is off the table. Changing the current retirement formula in a detrimental way is off the table.

About the only thing left on the table is figuring a way to minimize future salary increases for current Tier 1 employees so as to minimize their final average compensation used in the pension calculation. You can try to hold down the raises but that may not succeed.

One item that should be looked at is the timing and amount of the automatic step increases earned by SERS union employees in addition to a COLA. From a historical perspective, pre-union the step increases were designed to reward employees who were becoming more skilled at their job; once x time had elapsed you automatically got the raise. At the time the State didn’t have a formal COLA process so the steps kind of made up for that. But today with an annual COLA process (union negotiated), a lot of state employees end up with 2 raises a year, one COLA and one step.

Another place the State could get a bit of salary reduction is an idea that was tried before but then reneged on by the State (which some people, myself included, still resent to this day the State’s reneging on). At one time, instead of giving state employees a raise, the State agreed to pick up the 4% employee portion of the retirement contribution. This had the effect of reducing the final average compensation going forward by 4% plus. This would lower the projected future cost of current Tier 1 employee pensions a bit, resulting in a small amount of pension funding savings. However, if the State were to take this approach, it should be structured that the State can not renege on it in the future. Don’t know why us employees didn’t sue over it at the time … guess we still believe din public service and the amount of outrage wasn’t there.

Anyway, the way forward will be a lot of small incremental steps … plus the aforementioned tax expansion that will have to happen.

Note: the above suggestions pretty much only apply to SERS positions. As others have noted, the elephants in the room are TRS and SURS. Until you get the local school boards to hold down salaries, you can’t affect things much. That is why the normal cost shift will happen, now probably sooner than later, so the school boards have a reason to hold down salaries.

When the unions refuse this deal contract negotiations will go to arbitration/ mediation where their is no chance of them being given a 0% raise. Also consideration isn’t I can shoot you in the left knee or the right knee you get to chose. Pension law and Contract negotiations are seperate for good reason. It is time to start fracking and get the Chicago Casino up and rolling revenue and spreading the ramp out longer will be the way to solve this

I dont want to duplicate the same post elsewhere, but lets just keep it short and say while Cullertons idea is creative, its most liekely illegal.

The law is well settled that people can not be asked to sign away or give up protected rights. the most well documented example is discrmination sexual harassment. You cant, for example, ask employees to give up protection from discrmination or sexual harassment in exchange for raises, promotions or other typical job benefits.

Almost 20% of the current workforce qualify for retirement right now, so I would assume a significant number will simply walk. You can’t extort them if there not here. And, an already diminished state workforce would get appreciably weaker, so be prepared for more stories about ineffective and bad government.

===Actually Willy, it appeared that even Justice Burke agreed with the argument as to those things contained in the Pension Code itself.===

Shhh. “Don’t let the facts get in the way” of the single dissenting vote to make - A Guy.. -’s argument valid.====

You’re right Willy, silly me, I was actually referring to the 13 million people who live in Illinois rather than the 7 who currently interpret the Illinois Constitution. A majority of the legislature, a bigger body, thought otherwise too. In your efforts to be cute and clever, you forgot the governed- maybe you should run for something. You’d fit right in.

Once again the unions take no blame for the rise in pension costs. They helped drive the costs of pensions upward by not negotiating pension contributions upward and by helping some of the union employees sneak into the state pension funds for minimal state work.

Actually, Steve, the present value of a $60,000 annuity that increases 3% each year for 25 years discounted 3% is $1,456,000.

In fact, for TRS, the average annual pension for new retirees this year was $49,000 a year - for a present value of $1,190,000.

By the way, that retiree does not get social security - which would average about $24,000 a year for their pay history. So the pension, above what the rest of the private sector is entitled to through social security, is $25,000 a year.

The unions did their job, representing the employees. That’s what unions do. And the percentage was adequate IF the employer payments had been made when due.

The elected State representatives didn’t do their job, which was to control spending and fund the pensions they (on the state citizen’s behalf) were supposed to fund. The GA instead decided to short the payments and run up the credit card. Now it has to be paid.

As far as sneaking people onto the state pension systems, the GA members did a pretty good job of that themselves for their own advantage.

RNUG is exactly right; especially the last part about the pension cost shift going to the individual governmental bodies. This will be very detrimental to those taxing bodies that are under the PTELL impact. Unless PTELL is changed so that taxing bodies can levy outside of the aggregate, then this will be a slow death to a lot of governmental taxing bodies - - city govts., libraries, school districts, etc.

Requiring an increased employee contribution in order to receive the same benefit would be a diminishment.

Did you miss the part of the SC ruling that said “liberally construed”?

Let’s nip that dopey notion in the bud before it goes any further.

Look, everyone thinks SC has tied lawmakers hands, but the unions hands have been pretty much tied as well.

As I predicted.

Now that the Supreme Court has tipped its hand, union leaders don’t have much negotiating room. There members certainly are not going to allow them to give up something that the Supreme Court says can never be taken away.

Negotiation 101: Never give away something that isn’t even on the table.

I should have said in my earlier post that I too applaud Cullerton’s efforts to find a constitutional solution to the state’s budget problems. I suspect we are headed back to MJM’s proposal to end the pension cost shift.

As Rich has pointed out, the ramp up is pretty much over, and the proportion of the budget dedicated to pensions levels off for the next several decades. So what’s the crisis about simply following the Edgar payment schedule? The worst pain is over.

A guy, those same citizens want massive increases in program funding without large increases in taxes. Should we just switch to majority rule and throw out the balanced budget clause too? (Though I realize they monkey with it quite a bit as it is). Or hey, since we need increased revenue, why not forget about the flat income tax clause? Constitutions, both the State and federal ones, exist to prevent the whims of the day from easily changing what are seen as the founding principles of a government. Even without the clause, a contract is a contract per the federal Constitution. I know it would feel good to you to stiff the pensioners since they have a benefit you deem unnecessary, but they can’t. The massive amounts of money that have to go to the pensions now aren’t to fund luxurious pensions, they are to pay money that owed with interest. No different than bonds. The system would be over 80% funded were it not for the pension holidays. Hey I’ve got an idea, instead of trying to steal pension benefits, how about the state passes retroactive taxes for the years they skipped the pension payments to cover the shortfall, you would have to pay interest too of course. It is only fair since the citizens of the citizens of the State received services for those funds (borrowed from the pension system by skipping payments).

Of course that is ludicrous. It wouldn’t be fair to change the rules so late in the game. Just like you can’t rewrite a contract because you haven’t held up your end.

People don’t understand that with the state and employee contributions in their entirety growing at 7.5% per year (it is easy look at the S&P over time). You state the average pension value is 3 million dollars. I dispute that. The pension funds assume an average rate of return of 7.5%, If you had 1 million dollars invested, that would provide 75,000 dollars annually. As pensions are typically around 40k, you are looking at 533k pension value. The AAIs could be funded with principle for 29.6 years and the base of the pension would be paid entirely with interest.

“I think it’s fair to say that taxpayers also pay a great cost, but AFSME never seems to acknowledge our contribution.” AFSCME members bear the same great cost as other taxpayers PLUS the pension contributions from their paychecks.

Or you know, call it a million and never dip into principal once. People who don’t understand finance shouldn’t propose we toss the Constitution simply because they don’t understand how compound interest works.

While there are number of things a con-con could do, I’m not sure the IL citizens would like it. There are no magic beans.

Some possibilities:

1) repeal the Pension Clause, which will improve things in 30 or 40 years but does nothing to negate or payoff the current problem

2) re-affirm school funding is a State level responsibility and set a fixed contribution percentage, which will require more state level taxation but might allow for property tax reduction

3) change to a graduated income tax

4) impose expanded sales tax on services

5) impose term limits

6) expand the state constitution militia clause to cleary state gun possession is an individual right (just threw that one in to point out once you open the door, everything is on the table for change).

1. Blame the unions? Who agrees and accepts the teacher contracts—school boards (management). Most school board members are the elected representatives of their respective communities and, as such, presumably reflect the views of the voters.
2. Public employee salaries are available for public review. Why not private employee salaries? Such an availability would allow for an apple-to-apple comparison.
3. “A guy”—-obviously Kristen McQueary agrees with you per her editorial in today’s Chicago Tribune.

AFSCME: To suggest that politicians could prevent workers from bargaining for fair wages only if they surrender a protected right is the same kind of thinking that has delayed real solutions to the pension funding problem. It’s long past time for gimmicks.

Well said. This would completely throw the idea of bargaining on it’s back. You don’t go into a negotiation and put something on the table (pensions) which is a protected right and try to use it as leverage. That is a “straw Man” that needs smacked down….heck it is going no where and it must be meant as a message to a certain audience because Cullerton knows this is not going to happen.

I always thought that Republicans would like the state to have to pay its full legal pension benefits because they are always saying they want smaller government. The best way I know of to get smaller government is to shrink the pie! Spend more money on pensions and you have less money for other programs to grow or to be started. could it be that the mantra smaller government is a code word for something else and it does not mean what I think it means?

Once again the unions take no blame for the rise in pension costs. They helped drive the costs of pensions upward by not negotiating pension contributions upward and by helping some of the union employees sneak into the state pension funds for minimal state work.”

Except they did, hence the 9.4 that teachers pay into TRS instead of the 9% they paid previously.

Also, in case you missed it, the unions offered to increase employee contributions in the original Cullerton deal, but MJM and the House didn’t feel that drew enough blood, so…

As for the people jumping into the system after minimal work- I agree.

But that isn’t driving the cost here.

What I find more offensive are fat cats bleeding the system from within with $100000, $200000, $300000 a year walk aways.

Btw, MJM is one of those guys- he’s already on record saying he’d retire under “the old system”.

Even the rabid chick from the Tribune editorial board acknowledged that the funds that were to go into pensions were used to fix roads, build infrastructure, and provide services to the state (although she completely misses the point about who REALLY benefited from keeping taxes so artifically low)

Those people who carp about how the unions “looked away” while the state didn’t make payments are dead wrong about that too. The unions did sue for payment into the funds and were told by the ISC that the pension clause covered the fact that the state owes when it comes to pay- not how to responsibly fund that system.

A great list of legal solutions. As you and I both know, the political road to a solution needs to take a few more twists and turns before it coincides with the legal and moral solutions so many on this board (non any better then you) have laid out.

ANON @ 1:40 –As Rich has pointed out, the ramp up is pretty much over, and the proportion of the budget dedicated to pensions levels off for the next several decades. So what’s the crisis about simply following the Edgar payment schedule? The worst pain is over. –

This is and has been a purse snatching attempt by the investment bankers to get ahold of the pension funds of tens of thousands of people covered by DB plans. One of them is running for governor.

Remember what Rahm said? Never let a crisis go to waste? The Great Recession presented the opportunity and that opportunity is slowly slipping through the slippery fingers of those investment bankers.

The ramp table says it all. As soon as the would-be pension fund bandits admit that at no time will all employees be retired, the crisis will abate.

The IL constitution protects pension BENEFITS but says nothing about pension contributions. The GA can increase employee contributions as much as they want.

Uh, no. Where do you get these ideas? The contribution formula is part of the pension. Raise the contribution without raising pension IS diminishing the pension. Quit wasting our time and space with this kind of crap! Read and learn then maybe you can actually contribute to the discourse.

We all know the answer is to pay the pension ramp and make good on promises made. How you do it is a budgetary issue and the state may not like it but it has all the ability to make it work. You don’t get re-elected as easily when you take things from people as when you give them more. It was great to spend the pension dollars and have a blue state for services and a red state for taxes. Now, if the state could just break the law and have the retirees and current employees put that same money back in that the politicians spent by reducing their earned benefits — wow that would be the con of the century. Once that was done, the politicians could start down the road of doing it again in a few years. Thank god for the third branch of government!

Exactly. We have negotiated a higher contribution in exchange for enhancing our pension benefits. Goes directly to your point that contributions and formulas are all a part of the pension benefit. I am in the “alternative system” and some years back we agreed to pay more into the system in exchange for earning 2.5% per year of service instead of the less generous 1.6/1.9/2.2 depending on years of service.

Jack Handy: Good luck with that one too. I doubt it’s legal for an agency to charge two different people two different rates for exactly the same transaction, especially when any differences are irrelevant to that agency. “If you’re single, your FOID costs $X, but if you’re married it costs $Y.” Not gonna fly.

I think AFSCME is right here. What Cullerton is suggesting essentially denies employees their right to collective bargaining unless they give up something to which they have a constitutional right. Can you do that? I don’t think so.

I think Cullertons proposal is dangerous, and mean spirited. He would freeze hardworking public servants salaries for - in some cases - up to 25 years or more so that those very same public servants can receive the benefits of their constitutionally protected pension contract. That is not just holding the public servants hostage but even more importantly the Illinois Constitution.

“Extortion? Like, if you don’t agree to our demands at the bargaining table we will fund your opponent in the next election.”

Please. As if unions have THAT power. Do you see who IEA endorsed? Lisa Madigan (and Pat Quinn). Unions have the ability to influence SOME tight races, but anyone who thinks they have to power to completely overturn the status quo is off their gourd.

Trust me, if unions had a way to unelect MJM they would have a LONG time ago.

What Cullerton is really proposing is that you must give up your constitutional rights or have something of great value taken from you. I think that is such a dangerous idea and if done to state employees could be employed against other citizens in all kinds of ways. Heck the federal government could say you can keep your first amendment rights but only if you pay higher taxes.

Where’s “Big Mike” on this important discussion about the future of Illinois? Is he waiting until after the fall elections to ram through another kick the can down the road quick fix? Or, waiting for his daughter to pull off the “miracle of the millennium”? It’s too bad that Madigan wouldn’t even allow for the Senate’s negotiated pension legislation to be voted on in the House last year. Even though many people believe that legislation was also unconstitutional, it would have been a better place to start trying to fix this tragedy the politicians have created.

Dittos from me on RNUG’s commentary above. Maybe Cullerton’s trial baloon is based on the theory that there are enough near-retired workers who are “stepped out” (already at the top of their position’s pay scale steps) that they’d gladly trade raises for the compounding 3% COLA.

Once he has enough critcal mass and political cover, we’ll see the TRS and SURS community college normal pension cost shift, an increased income tax rate, a new / expanded service sales tax, an dmassively increased school funding coupled to some mandated property tax reduction (of the school portion) all rolled into one “grand bargain” of a bill.

That will be MJM’s legacy, fixing the school and pension funding. Then he’ll tip his hat and ride off into the sunset, leaving the State to Lisa.

“Did you not know that public employees pay the exact same taxes on their earned money that you do?”

So, are you asserting that the pension is not “earned”? I though that the basic argument is that the pension is deferred compensation, that is earned, and cannot be taken away. And the state exempts it from taxation.

Chris @ 4:32
Illinois does not tax retirement income (like deferred compensation or Social Security) for non-public retirees either, so the statement that public employees pay on the same terms is correct.